Generally, computerized ledgers are databases operated on one or more servers by a specialized computer, or operated on a specialized network and controlled by separate computers. A computerized ledger records encrypted or otherwise secured records of transactions, and a computerized ledger can be, among other things, centralized, decentralized, or distributed. Briefly a centralized computerized ledger system is where all nodes connect to a central hub. The management and modifications to the computerized ledger in a centralized environment are generally performed by a centralized computer system and there is usually only one official (or consensus) copy of the computerized ledger. A distributed computerized ledger (DCL) system is where all nodes are independently connected to each other, and the management and modifications to the computerized ledger in a distributed environment are generally performed by separate computers and each computer usually stores its own official copy of the computerized ledger which is proofed for accuracy by a consensus system running on the decentralized network.
The use of distributed computerized ledgers is gaining acceptance and popularity in a number of industrial uses including health care, international trade, and electronic (or crypto) currencies. Distributed ledgers are believed to have a number of advantages over other storage and transaction recording systems. Among the advantages of distributed ledgers are the ability to perform simultaneous updates across multiple fully independent nodes, decreased risk of data loss and corruption through widely distributed consensus-proofed copies, and the ability to create peer-to-peer environments where network validated transactions can be executed with or without a central intermediary. In theory, removing central intermediaries and more directly connecting counterparties through an instantaneous updating and tamper-proof ledger has the promises of improved speed, transparency, and efficiency in related computer systems and networks.
Through supporting systems and internet connectivity, computerized ledgers typically write, encrypt, store, access, and transmit stored and modified records to specialized computers or specialized networks of computers. DCLs are expected to deliver a number of benefits over alternative storage and access systems including, high levels of security, immutability of transaction records, automated integrity processing, and concurrent read/write capability across multiple nodes. While implementations are currently limited, industry forecasters continue to expect DCLs to store and process transactions relating to commercial goods, health records, tangible property, financial instruments, and other items.
Developers of DCL technology face a number of competing tradeoffs and challenges in function and practical implementation. For example, some of these competing tradeoffs and challenges include secrecy of data, privacy of transactions, speed of recording transactions, speed in updating records, speed in storage and transmission, and full security of the transactions record trail. Typically DCLs engage in redundant movement of transaction data on a peer-to-peer basis such that there is independent processing at every relevant node to facilitate different forms of consensus control and audit, often without the services of a central administrator.
One of the most common data structure formats for DCLs is a block format, in which transactions are aggregated and processed within distinct computer timestamp measured periods of time, and where each aggregation of properly authenticated transactions is written to the DCL in the form of an appended block or comparable structure.
Where a DCL relies on multimode consensus, audit trails and sequencing control may include a range of cryptographic techniques including so-called mining processes based on cryptography or processing power (also known as “proof of work”) or proof of stake processes based on holders and holdings within the records providing some validation. Even in some of the least data rich DCLs, such as the block chain implementations of cryptocurrencies (including Bitcoin, Ethereum and the like), the computational burden of basic transactional data in DCLs is slowing networks and jeopardizing recordkeeping, accuracy and potential growth. Cryptocurrencies typically contain only the data necessary to maintain transaction records; as industry attempts to expand the types of DCL applications, higher data requirements are certain to further frustrate processing and transmission speeds.
Most decentralized electronic ledgers (including those used for electronic currencies) are limited in functionality in that their representational blocks are homogenous and their use of timestamped sequencing is limited to curing the “double spend” problem; that is, the transacting of a ledger item which has already been transacted. The most promising known solutions to higher functionality involve pushing more data or computer code through already limited blocked data arrangements.
The promise of DCLs is big, but the industry is still challenged by the barebones data requirements of cryptocurrencies; using known techniques including colored coins and smart contracts to put real estate, health records, commercial transactions, and financial instruments on DCLs is likely to exacerbate current speed and block size challenges. The addition of smart contracts is already introducing serious security concerns.
Expanded implementation of DCLs, for example beyond homogeneous block cryptocurrencies, has been slower than many professionals in computer science, government, and commerce had anticipated. The simplified homogeneous blocks of electronic currencies are already proving difficult to transact, transmit, and secure; news reports regularly cite problems including delays in validations and settlements, and excessive transaction costs. Proposed extensions of DCLs are generally directed at techniques such as colored coins and smart contracts, however these types of implementations also have many drawbacks including they will: (i) demand continuously revised and customized systems, (ii) add additional pressure to networks and computer systems relating to processing, storage, and transmission, and (iii) introduce vulnerabilities where operative code or descriptors is openly accessible or widely distributed.
Data heavy DCLs (including colored coins and smart contracts) will have a number of drawbacks including: (i) the need for purpose built architecture, operations, and interfaces for new applications and implementations, (ii) the need to coordinate the storage of application specific data and the operations of that data with all possible contributors and users, and (iii) the technological limitations relating to increasing file and block sizes which hampers processing efficiency, decreases practical applications for many users, and severely limits a universal application approach. For example, bitcoin's architecture of 1 gigabyte block sizing and 10-minute block-creation intervals has created an aggregate block chain size of approximately 150 gigabytes, and transaction frequencies limited to fewer than 10 per second; these limitations inherent in the known DCL architecture preclude or severely limit its use in high frequency applications such as retail sales and financial markets. Some systems designers have proposed “trusted systems” for speeding up transactions in which a parallel transaction settlement system is run in conjunction with the block chain; in these systems a trusted intermediary executes rapid transaction settlements on a centralized network, and then the intermediary's transactions are released in bulk to the distributed ledger.
However, these types of parallel transaction settlement systems are known to have many drawbacks. For example, one drawback is that running two systems in parallel demands twice the resources to accomplish the same work as a single system. Another drawback is that, since input errors are always a possibility, the probability of an error increases because the amount of data being input doubles.
Thus there still remains a need in the art for a system and method that provides the advantages of current such computer ledger systems without the above drawbacks. Furthermore there also remains a need in the art for a system and method that is compatible with current technology.